At least 17 people were killed in heavy clashes in the Yemeni city of Taiz on Friday, a day after a U.N. envoy began a new mission to push President Ali Abdullah Saleh to quit under a Gulf peace plan.

Witnesses and medical staff said at least 30 people were also injured when Saleh's Republican Guards shelled some districts in Yemen's third largest city, a hotbed of anti-Saleh protests, and in clashes some 200 km (120 miles) south of Sanaa.

Opposition tribal fighters, using automatic rifles and shoulder-held rocket launchers, killed two soldiers and wounded seven, according to a Defence Ministry statement. Witnesses said fighters destroyed one armoured vehicle in al-Hasab.

Residents said it was some of the most intense shelling since an uprising demanding that Saleh end his 33 years in office began in February.

They said shells fired by government forces landed on houses across the city, killing people inside their homes. Hospital officials said an eight-year-old girl died when a shell crashed into her house in the al-Hasab neighbourhood in western Taiz. Her mother was critically wounded.

Four women and two children also died in intense shelling of the al-Rawda and Zaid al-Moshki districts in central Taiz as well as Freedom Square, where the blasts prevented demonstrators from holding their weekly Friday noon prayers.

Saleh's forces later shelled al-Rawda Hospital, where victims of earlier fighting had been taken, killing one patient and wounding five. Witnesses said patients were moved to the basement after the shells damaged the third and fourth floors.

The hospital was hit by nine shells, and the third and fourth floors have been damaged, one witness told Reuters.

Residents said the clashes began on Thursday after gunmen shot and critically wounded a soldier stationed at a government building. This was followed by the killing of a pro-Saleh tribal leader and the wounding of one of his bodyguards.

Saudi Arabia, the world's largest oil exporter which shares a long and porous border with Yemen, is worried violence in Yemen may strengthen al Qaeda militants based there who have launched attacks in the past on U.S. and Saudi targets.

In the capital Sanaa, tens of thousands of anti-Saleh protesters attended prayers on a main road. Some demanded the president be tried for what they called his crimes against the Yemeni people.

Separate prayers were held by thousands of Saleh supporters in the capital. There were no reports of violence in Sanaa.

The fighting cast a shadow on a new mission by U.N. envoy Jamal Benomar who arrived in Sanaa on Thursday to encourage an inclusive transition process that meets the needs and aspirations of all Yemenis, a spokesman said.

REPORTING TO U.N.

Martin Nesirky, spokesman for U.N. Secretary-General Ban Ki-moon, said Benomar would report back to Ban, who is to inform the U.N. Security Council about the implementation of a resolution adopted last month that called on Saleh to accept a Gulf-brokered plan under which he would step down.

A statement issued by Saleh's ruling General People's Congress said they were edging closer to an agreement with the opposition alliance on a deal to end violence.

The agreement, in its preliminary draft, is a mechanism with a timetable for the Gulf initiative and the U.N. Security Council, the statement said.

Its essence leads to a peaceful transfer of power and early presidential elections, it added, noting the accord also calls for setting up a national unity government and a return of the army to barracks.

Saleh, who has clung to office despite pressure at home and abroad, has repeatedly wriggled out of signing the deal.

France has said the European Union will discuss freezing Saleh's assets to increase the pressure for his departure.

The plan calls for Saleh to hand power to his deputy, Abd-Rabbu Mansour Hadi, who will oversee the formation of a national unity government ahead of an early presidential election.

Benomar met Foreign Minister Abubakr al-Qirbi in Sanaa on Thursday and was expected to meet Hadi, as well as opposition leaders who are due to return from a Gulf tour within days.

(Reporting by Khaled Abdullah in Taiz and Mohammed Ghobari in Sanaa; Writing by Sami Aboudi; Editing by Sophie Hares)